Tuesday, November 13, 2012

Murphy's Law? or, Follies of a Finite Physicist

"Murphy was an optimist." - Unknown

It's two years later, and I'm still being linked to Tom Murphy's famous blog post, "Exponential Economist Meets Finite Physicist." The header reads "1787 views this month; 0 overall," which I assume is a coding glitch rather than an existential conundrum; the point is, the post continues to receive a lot of attention. And, as you should know by now, it is in my basic nature to critique things that receive tons of attention while at the same time being less than fully brilliant. Usually, I gleefully support the trolling of economics by physicists; today, it's time to troll my own side.

Tom Murphy, a physics professor at University of California San Diego, writes a blog called "Do the Math", in which he attempts to show that every single alternative energy source is going to fail, and hence economic growth is soon going to either grind to a halt (in the best case scenario) or go into full reverse. But his most famous post, if my Twitter feed is any guide to fame, is "Exponential Economist Meets Finite Physicist." Because in this post, he purports to show that economists' most basic ideas about growth are inconsistent with the laws of the Universe.

The post is structured as a sort of Platonic dialogue, in which Murphy recounts a dinner conversation between himself and "An Established Economics Professor from a Prestigious Institution," a mild, bumbling individual who begins the exchange with utmost confidence in a rosy future of unlimited growth, but - after a thorough thrashing at the hands of Murphy - is forced to reexamine and recant most of his ideas.

Murphy's basic argument is this: Exponential growth can't continue forever, because of A) waste heat, and B) energy limitations. If we keep energy usage growing at a 2.3% annual rate, waste heat will boil the Earth in 400 years. Keep that up for 2500 years, and we'd be using the entire energy output of the Milky Way Galaxy. Hence, economic growth must halt.

This is correct. And in fact, Murphy didn't even need to mention waste heat or anything like that to make his argument; he could have just said "Hey, eventually the Sun will explode, and then the whole Universe will degrade into heat, and where will your economy be then?" So what if that happens 500 million years in the future, or 10^100 years? What's the difference? One way or another, the human race is kaput!

Are economists ignoring this basic fact? Do economists' models crucially hinge on the idea that economic growth will continue forever and ever and ever? No. The "long term trend growth" that is used in growth and business cycle models is only meant to represent a trend that lasts longer than the business cycle - so, longer than a decade or two. No economist - I hope - thinks that currently living humans are making economic decisions based on what they think is going to happen in 400 years, or 2500 years, or 500 million years.

The fact that Murphy's interlocutor fails to point this out tells me that either his existence is partially apocryphal, or hiring standards at certain "Prestigious Institutions" have fallen.

Murphy does make an attempt to argue that 2500 years (and hence 400 years) is not a very long time. Here is his argument:

2500 years is not that long, from a historical perspective. We know what we were doing 2500 years ago. I think I know what we’re not going to be doing 2500 years hence.

Does anyone else think this is complete gibberish? Does the fact that we have history from X years ago imply that we should be able to forecast the future X years in advance? And the idea that "we know what we were doing 2500 years ago" makes 2500 years a short amount of time...does that make any sort of sense? I mean...we also know what we were doing 2 billion years ago. Is 2 billion years "not that long, from a historical perspective"?

In "Act Two: Salad", the possibly-apocryphal economist comes up with a pretty good retort: What about virtual reality? With awesomely powerful computers, we can simulate whole worlds. Virtual apples, piped directly to the pleasure centers of your uploaded mind, are just as yummy as real apples, and a heck of a lot cheaper to create in terms of energy. That's quite a lot of economic growth, right there.

To which Murphy replies:

[N]ot everyone will want to live this virtual existence...I suspect many would prefer the smell of real flowers—complete with aphids and sneezing; the feel of real wind messing up their hair; even real rain, real bee-stings, and all the rest. You might be able to simulate all these things, but not everyone will want to live an artificial life.

Oh really? Well, that's settled then...and while we're at it, who'd want to spend a third of their waking life in front of a glowing screen? Oh wait...

Anyway, Murphy continues:

And as long as there are any holdouts, the plan of squeezing energy requirements to some arbitrarily low level fails. Not to mention meeting fixed bio-energy needs.

See, this is true, but it doesn't help Murphy's point at all. Suppose there are 100 holdouts who refuse to upload into a virtual world. Suppose that these people's standard of living doesn't increase at all, but the standard of living of the uploaded people in the virtual world keeps going up and up (say, as new virtual stuff gets invented inside that world). In that case, economic growth is still positive, even though the 100 physical people aren't seeing any of the benefits! Economic growth does not necessarily benefit all people equally (as America has recently learned). Murphy seems not to realize this at all.

In the third act, "Main Course", Murphy asserts that energy can't become arbitrarily cheap. He supports this contention with a truly eye-popping piece of bad economics:

But if energy became arbitrarily cheap, someone could buy all of it, and suddenly the activities that comprise the economy would grind to a halt. Food would stop arriving at the plate without energy for purchase, so people would pay attention to this. Someone would be willing to pay more for it. Everyone would. There will be a floor to how low energy prices can go as a fraction of GDP.

What?! What about the air, dawg? Air is arbitrarily cheap right now. There is a finite, fixed amount of it. And without air, no economic activity could happen. Do you see anyone trying to corner the air market? No. So why should energy be different? The answer: It shouldn't. Because if someone started buying up all the air in the world, the price of air would rise until he had to quit; he could then sell off the air he had bought, but he would be unlikely to make a profit. This is why market corners nearly always fail.

The fact that the "Established Economics Professor" fails to point out this obvious howler, and instead meekly concedes Murphy's point, only further convinces me that his existence has been a bit...colored by embellishment.

OK, after much verbose meandering, Murphy concludes with the following:

The conversation recreated here did challenge my own understanding as well. I spent the rest of the evening pondering the question: “Under a model in which GDP is fixed—under conditions of stable energy, stable population, steady-state economy: if we accumulate knowledge, improve the quality of life, and thus create an unambiguously more desirable world within which to live, doesn’t this constitute a form of economic growth?”

I had to concede that yes—it does. This often falls under the title of “development” rather than “growth.” I ran into the economist the next day and we continued the conversation, wrapping up loose ends that were cut short by the keynote speech. I related to him my still-forming position that yes, we can continue tweaking quality of life under a steady regime. I don’t think I ever would have explicitly thought otherwise, but I did not consider this to be a form of economic growth.

So, here in the epilogue, Murphy basically concedes the whole argument. "Yes," he says, "Growth as defined by economists can continue indefinitely, but I don't really consider that 'growth'. My entire argument about finite 'growth' was based on me using my own Tom Murphy definition of 'growth in energy usage', rather than the definition given in any undergraduate economic textbook." All concepts "fall under the title" of what Murphy instinctively feels they ought to be called.

Nice to clear that up.

OK, now, as a physicist-turned-economist, let me hit you with this one: Murphy's "still-forming position" probably isn't right. What he calls "development" (i.e. what economists call "growth") will also probably halt. Why? Because we will eventually satisfy ourselves. Modern economics is based on the idea of "local nonsatiation" - the idea that no matter how much you have, you always want more of something. But local nonsatiation is not necessarily true in the real world. Actually, given the fact that human motivation arises from physical processes, local nonsatiation must fail in some situations. Rocks are completely satisfied. Dead people are completely satisfied.

So as soon as humans completely satisfy ourselves, economic growth will stop. This probably won't mean "getting all the stuff we want". It'll mean changing our desires directly, through the application of Desire Modification technology. This is far easier than creating a virtual world to give us ever-increasing amounts of virtual stuff. Instead, we just change ourselves to like the world we have, more and more. When we like the world so much that we don't want anything to change, then we will have no more reason to grow the economy.

In fact, many economists know this. When I took my second-year grad macro course, my teacher (Miles Kimball, of course) started the class with a list of the various time scales at which economists model the world. A few months was the "very short term". A few years was the "short term". A few decades was the "long term". And 100 years was the "very long term". Next to the words "very long term", Miles wrote "(all human problems solved)". At this point, he noted, all our models would become beside the point.

So Tom Murphy thinks he has found an epic gotcha. He thinks that with a few moments of thought, he has managed to expose the concept of "long-term economic growth" for the fraud it is, and thus undermined the foundations of much of economics. But he is wrong. He - and his not-very-credible dinner-discussion foil - have merely pretended that economists believe things about the far, far future that they do not actually believe. And in the meantime they have failed to say anything useful about economic growth over the next 100 years.

Look, I am all for physicists barging in and busting up the cozy world of economics. I welcome this. I encourage it. It's a good thing. But stuff like "Exponential Economist Meets Finite Physicist" just falls under the title of...well...let's just say it doesn't fall under the title of trenchant critique.

(Note: Just so readers don't get the wrong idea, I do think Tom Murphy generally does good analysis regarding alternative energy technologies; I do think oil scarcity is a source of economic stagnation and that the government should be pouring funds into alternative energy research; and I do think that there are economists out there who don't take energy scarcity as seriously as they should...)

78 comments:

"Exponential Economist Meets Finite Physicist" is awful, and exemplary of physicists on the internet who are convinced they can do economics despite all evidence to the contrary...but, let's face it, at least it's not econophysics.

Strange... at Star Trek universe I see the diferent captains of Enterprise (Kirk, Piccard) say to people of XX and XXI century that their economy work diferent. They can use synthetizators for create anything they wnat and need: food, frink, gold metal bars...

I am not sure how much time until that thecnology will be created, but we are using celular phones that I am sure I saw being used at the classical Start Trek from teh 1960's. But when that thecnology someday happens, we will not have more scarcity. And without scartcity Economy don't exist.

My reaction in reading this was I'm glad the unknown economist was not a straw man rather than someone like Don Bordreaux at GMU, or Tom Murphy would have ended up like the Black Knight in Monty Python and the Holy Grail.

"Exponential growth cannot continue forever" is a banal and obvious statement, because "forever" is always unattainable.

Economic growth, as defined by economists and not Murphy, can continue indefinitely. Murphy's definition is wrongheaded and irrelevant, because it conflates growth and energy consumption (and implicitly population growth). Yes there are some limits to energy consumption and population expansion if we assume that the universe is finite (it may not be). Even if that is the case we are adapting quite well (although certainly not perfectly) to the limits as we experience them today. Population growth in the West has slowed to a trickle.

Surely you're not suggesting that the world is infinite? While the universe may be infinite, planet Earth, the one planet where humans actually live and most likely will live for the foreseeable future, most certainly is FINITE. Or does economics somehow make this not so?

As well, while population growth in the West has slowed, the West still consumes a disproportionate amount of the planet's resources (e.g. Americans who are 5% of the population consume almost 25% of the planet's resources, which are physical if I'm not entirely mistaken). Can everyone on Earth get to an American level of wealth? Physical reality suggests not, but economists think otherwise. But I'm not a trained economist so...

I followed Murphy's for a while, before his often embarrassingly bad economic analysis pushed me to unsubscribe.

As for long-term growth, I figure that even if we don't Desire Modify ourselves into satiation, it will eventually slow down as we start hitting some limits on the technology we can do, are willing to pay for, and socially accept. When almost all technology hits the point that high-energy particle physics is at right now (it takes billions of dollars and expensive equipment just to make further discoveries), you'll likely see a slow-down in productivity and growth.

But satiation may not ever be genetically inherited. Youth will always rebel against the established order trying to impose limits to desire, and the poor will always want what others have that they do not. So does the cessation of growth also require absolute equality, and that children are involuntarily subjected to some kind of Desire Modification? Are we talking about Brave New World? Hopefully the sun will explode first.

"Involuntarily subjected" makes a lot of assumptions. Nobody chooses what their desires are, we're simply born with them. (People make a lot of noise about how sexual orientation isn't a choice, for instance.) The only difference would be that people would be born with different desires. That doesn't really impact individual freedom in any meaningful sense relative to the status quo, although it might hurt the collective diversity of society.

My entire argument about finite 'growth' was based on me using my own Tom Murphy definition of 'growth in energy usage', rather than the definition in any undergraduate economic textbook." All concepts "fall under the title" of what Murphy instinctively feels they ought to be called.Nice to clear that up.

Talk about astounding arrogance on Murphy's part. He doesn't even bother to use the standard definition of growth, preferring his own "Tom Murphy" version of what it ought to be - and then tries to lecture economists on how they're wrong about concepts in their own field.

These kinds of economic interventions by physicists have been going on for a long time. I also had a physics major friend in college try to convince me that if I only understood the Second Law, I would see how economics was all wrong. Somehow the debate put me in mind of this passage from Frank Ramsey:

... Where I seem to differ from some of my friends is in attaching little importance to physical size. I don’t feel the least humble before the vastness of the heavens. The stars may be large but they cannot think or love; and these are qualities which impress me far more than size does. I take no credit for weighing nearly seventeen stone.

My picture of the world is drawn in perspective, and not like a model to scale. The foreground is occupied by human beings and the stars are all as small as threepenny bits. I don’t really believe in astronomy, except as a complicated description of part of the course of human and possibly animal sensation. I apply my perspective not merely to space but also to time. In time the world will cool and everything will die; but that is a long time off still, and its present value at compound discount is almost nothing. Nor is the present less valuable because the future will be blank. Humanity, which fills the foreground of my picture, I find interesting and on the whole admirable.

You've done a nice job explaining and correcting the economics discussion here. Thanks. Still, not very hospitable of you to welcome a physicist into an economics discussion by basically calling him a liar and an idiot, eh?

Seems to me Murphy has made a sincere effort to think about how knowledge from his field affects economics. He's pointed out something that many economics students will find interesting (don't think of "the very long run" as being "forever" because physics puts some hard limits in place), even if the better students will not find this to be life-changing, or even new information. He's got some economics wrong. He's had an interlocutor (the other economist) who either didn't want to get into details and burst his bubble, isn't quick on his feet, explained this stuff but wasn't understood by Murphy, or is himself bad at economics. So sue him!

1. Murphy didn't call anyone a liar.2. I didn't read the tone of Murphy's post as being as patronizing as this one. Both posts are fundamentally about "I think you're missing something important," which is a tricky topic to discuss respectfully. Hard to quantify who's more patronizing, so I'll stop arguing about it.

Most of this post a good counterpoint to Murphy's fuzzy logic. And then it got to the part of Desire Modification Technology, where the post all of a sudden sounded like Murphy's in its irrational faith to predict the distant future. The only response needed at this scale is "in the long run we'll all be dead."

Noah, I can't help thinking that you're responding to this firstly as an attack on your profession, and then waving away the interesting parts with "our predictions don't go that far" or "we'll modify our behavior with Noah's machine"

I'd rather hear about who in the Econ. profession is looking at energy usage trends and what a future with declining energy input might look like. 400 years really isn't that far in the future, and meaningful effects of declining energy production may affect us far before that.

It seems to me that there is still plenty that's of interest in Murphy's post.

Noah, I can't help thinking that you're responding to this firstly as an attack on your profession

Actually I like attacks on my profession, and I make them quite frequently myself...

I'd rather hear about who in the Econ. profession is looking at energy usage trends and what a future with declining energy input might look like.

Try Jeff Rubin. Also Jim Hamilton, though his work is more about the short term.

400 years really isn't that far in the future

Maybe not, but no economic model can predict 400 years into the future. Imagine trying to make an economic model in 1612 to predict what the economy would be like in 2012! 400-year predictions are the domain of science fiction writers.

Of course, in 400 years, I'm pretty sure they'll laugh hysterically at what we considered 'physics'. They'll consider what we think now closer to Phlogiston and the Ether, than what is actually understood in their era. And most likely, the +800 year-ers will consider the +400 year-ers hopelessly primitive as well.

In other words, it's not just Economists who are bad at thinking about the far future.

"in 400 years, I'm pretty sure they'll laugh hysterically at what we considered 'physics'."

I very much doubt that. Current physics has well known limitations. However, it's also been able to make accurate predictions about what the cosmic background radiation would be. When you can get something that happened 13.7 billion years ago right your're on to something.

I really hate when people bring up "Economy as a heat engine" arguments. Irrelevant is too kind a description. In any case, based on our twitter conversations I doubt you'd disagree that exponential energy use is doable on a relevant time scale (even up to satiation), even without fusion; between fission and solar, there is no practical limit on human energy use even after our Sun goes Nova. There are always other stars. If that starts becoming an issue we can always move to the accretion disk of a black hole ala Battlestar Galactica.

I'm not so sure about the satiation point though, and certainly not digging the desire modification concept. I don't see any reason why our ambition should not reach demigod like levels in the very distant future (to the extent that "our" is applicable to evolutionary heirs). An existence like that in The Cyberiad is not impossible on an infinitely long time scale.

"I really hate when people bring up "Economy as a heat engine" arguments."

Welcome to the World Of Biology, where every day seems to bring another "Evolution Isunreal because Thermodynamics! And Stuff!" We've been dealing with this kind of silly-ass "I'm an Expert, so I know Everything!" argumentation for a long time. It gets a bit wearing on those of us who really do know everything.

I think Murphy just use the intuitive definition of growth. He should have known better, especially being a physicist.

People (I concede, not economists) often can't figure out how economic growth is possible without more stuff.

Murphy answer that question himself but I think the interesting thing is how fast economic models based on exponential growth (all of them) can fail. It is difficult enough to remember the economic lessons from the 1930's, now imagine a whole new steady state world.

The transition from growth economics can be hard, and the need for transition is probably near than people imagine as it should happen way before any thermodynamic limit.

I don't understand your comparison with the air: people don't need more of it to "grow", and it is difficult to market. Pollution could be a good metaphor for (negative) growth but even the most polluted areas air is far from being really scarce. And if it was, maybe we could run into the same problems as energy, or worst.

Air is scarce by economists' definition, so it is a commodity. Because it is relatively abundant, however, it is very low cost. This is the argument OP is making. The only way for useable energy to become very low cost is for it to become either very abundant or only needed very sparingly. In either case, a would-be monopolist could try buying as much as possible, but that would only increase its relative scarcity, and drive the price up until it becomes exceedingly difficult to monopolize. The market would then incentivize said monopolist into dissolving his stock - in other words, it would become more valuable to him to sell then to keep.

Hi Noah. I came across Murphy's post ages ago and never finished it (because the economics was bad). It's nice to see you clearly refute some of the issues in his dialogue. A lot of non-economists think of "economic growth" simply in terms of producing more stuff (which correlates for the physicist in using more energy) rather than in terms of value produced by a given input (producing the same amount of stuff using less energy/labor constitutes growth).

What interests me, however, is not Murphy's mistakes but your assertion that there is probably a point where local nonsatiation will no longer be true for human society. That assertion is bizarre to me. Would you care to back it up with evidence of some sort? Is there some way to measure satiation? (The history of human economies is a history of 1) making labor more productive and 2) and new labor to old (productive) labor. Nothing intuitively tells me this process will stop. At the very least, as long as the environment humans live in changes, society will always be in the process of appropriately adapting its labor. I don't envision humanity having the power to control everything in its environment, so I can't see satiation ever stopping.

Ah. Unless you drug everyone with your useless D-mod pills and turn them into rocks. I don't know why you think destroying the human will is somehow desirable.)

"No economist - I hope - thinks that currently living humans are making economic decisions based on what they think is going to happen in 400 years, or 2500 years, or 500 million years."

I doubt any economist thinks currently living human beings do that, but the infinitely-lived representative agents in their models do. Although, due to the discount rate, the factors 500 million years from now don't weigh heavily into their decisions.

The reason you discount it is that you will be richer in the future. The discount factor for a future time period should only be zero given that the future you will be completely satisfied. If you were to be poorer in the future, you should weight consumption in that time period higher than present consumption (given utility maximization).

Given that we have some pure discount rate (impatience?), that is probably irrational (and I haven’t seen anyone claiming that taking that into account would constitute utility maximization – but would love to read it since I have heard that that position exist)

Even though Murphy's post is full of things that don't make sense, it does raise an interesting point (at least for me). Rather than boiling the Earth 400 from now, what is the effect of waste heat in a long term scenario - 50 years? Does the IPCC panel factor it into their global warming models in addition to the greenhouse effect? What is the waste heat from economic activity contribution to the expected heating of the atmosfere by all of the possible reasons? And how do the different energy sources alter that? (Ie wind obviously will be better than oil for that matter!)

Murphy assumes 10x growth per century, so you can extrapolate backwards...at that rate of growth, 300 years from now we'd be producing 10% of the heat required to boil the planet, and 200 years from now, 1%. Small compared to global warming...and smaller if you factor in decreasing energy intensity (which slows that rate of growth) and falling population.

Murphy's idea is nothing new among scientists. Hubbert wrote "Exponential Growth as a Transient Phenomenon in Human History" in 1976.

Or among economists: Herman Daly, "Sustainable Growth: An Impossibility Theorem" 1992 in which he uses the same nonstandard usage of growth as Murphy (i.e. economic growth refers to physical growth and economic development refers to changing quality).

So his whole case that it can't grow forever is refuted as pointless, irrelevant to reality, right there.

He gets other equally simple and obvious facts just as wrong -- how "scientific" is that? -- and yeah, the logic he tries to build on these should-be-embarrassing errors is even worse.

I'd rather hear about who in the Econ. profession is looking at energy usage trends and what a future with declining energy input might look like

Say the words: "Productivity increases", which means getting more from less, just as we already are -- more GDP from *less* of both energy consumption and material consumption. See the data for both through the link.

I plotted electricity consumption against time for Denmark, US, Japan, India, and China once -- I got inverted U's in the industrialized countries and a negative first derivative, suggesting a trend towards an inverted U in China and India. The environmental Kuznets curve exists. It's incredible to me there haven't been more papers on it.

Well, of course it is true that energy efficiency has increased in recent years, and that the amount of energy needed to produce an additional $ worth of GDP has declined.

However, increase in GDP and increase in energy are still positively correlated. If we produce more, we use more energy, and GDP growth and growth in energy use still go hand in hand.

I really cannot see how you ever get to a regime where an increase in GDP is correlated with a *decrease* in energy use across the board, no matter what kind of economy one envisions.

It might not be impossible, but it seems very unlikely, and certainly it is very naive to simply continue current trends of declining energy use per unit of GDP into the future and extrapolate to negative rates, where additional units of GDP *decrease* energy use (across the board, I grant that individual investments might have this effect, but not all of industrial production and services will...).

Information processing capabilities -Computational power is not the same thing, nearly as human thought. Innovative human thoughts connect disparate nodes on a graph with a new edge (ask your Dad if brain science confirms that at a neuronal level; I'd like to know). The best smarts we've come up with are to train computers to work like Bayesians, connecting to together nodes which are already really linked together. Humans think in terms of metaphors, which allow us to translate a cluster of a thought-graph from one region, all the way over to some other almost completely unrelated portion of the graph, and form explosively-many new combinations by connecting nodes. I.e. I can think of your blog in terms of a fight I had with an ex-girlfriend once, say, and write a poem about it. That's a zany process that we don't have the slightest idea how to predict or re-create.

Persuasion -McCloskey reports it's already a 1/4 of GDP, and will probably grow as material technologies drive cost functions through the floor.

. . . and then into this blurb from your desire-modification technology post:"When we can decide what we want, desire becomes less important than meta-desire. What do we want to want? And what do we want to want to want? Etc. D-mod is like putting the parameters of the utility function in the utility function itself."

That's what persuasion is, guy. The alteration of meta-preference utility maps, if one needs to think of things in terms of optimization. In fact I thought long and hard for months about how to construct such a model (Becker's second order preferences don't slice it). It's just not possible unless you do some fancy dances: a recursive model, iterated time periods, etc, etc. Have to solve that infinite regress problem.

What are we getting at with metapreferences and persuasion? The interesting bits of being human and making real, purposive choices. What's a second or third order preference function? Subconscious. Social norms. A cache of decision heuristics. I don't know.

But the futuristic technology you're describing already exists in human consciousness and persuasion, and those things in combination with the temporal constraint make it hard for me to imagine the sort of techno-paradise you're imagining. Maybe rather a paradise with a lot more dog walks, massages, and Dr. Phil in combo with steady-state material consumption. But hardly one where human desire has just disappeared.

"Tom Murphy, a physics professor at University of California San Diego, writes a blog called "Do the Math", in which he attempts to show that every single alternative energy source is going to fail, and hence economic growth is soon going to either grind to a halt (in the best case scenario) or go into full reverse."

When will solar fail? In 3 billion years when the sun dies? I don't see this guys solar power expertise, but top engineers in this field I've read about are very confident that in coming decades solar will get very cheap and ubiquitous. For example, here:

http://www.scientificamerican.com/article.cfm?id=a-solar-grand-plan

Here's the great growth economist Paul Romer of Stanford in an interview in reason:

reason: You have written, "There is absolutely no reason why we cannot have persistent growth as far into the future as you can imagine." Your Stanford colleague, the biologist Paul Ehrlich, disagrees. He believes that economic growth is an unsustainable cancer that is destroying the planet. How would you go about convincing people like Ehrlich that they are wrong?

Romer: Paul seems singularly immune to being convinced. He has been on the wrong side of these issues, so I wouldn't set that as my standard of persuading anybody. However, if I took a neutral observer who might listen to me and Paul, there's a pretty easy way to explain why I'm right and why Paul misunderstands. You have to define what you mean by growth. If by growth you mean population, more people, then Paul is actually right. There are physical limits on how many people you can have on Earth. If we took peak population growth rates from the '70s at 2 percent per year, you can only sustain that for a couple of hundred years before you really run into true physical constraints.

reason: I would remind you that Ehrlich said that there would be billions of people dying of starvation in the 1980s.

Romer: He got the potentials wrong and the time frame wrong, but it's absolutely true that population growth will have to come to zero at some point here on Earth. The only debate is about when.

Now, what do I mean when I say growth can continue? I don't mean growth in the number of people. I don't even mean growth in the number of physical objects, because you clearly can't get exponential growth in the amount of mass that each person controls. We've got the same mass here on Earth that we had 100,000 years ago and we're never going to get any more of it. What I mean is growth in value, and the way you create value is by taking that fixed quantity of mass and rearranging it from a form that isn't worth very much into a form that's worth much more. A canonical example is turning sand on the beach into semiconductors.

I find the idea of 'desire modification' the most terrifying thing imaginable... It's fine to be a slave because I want to be a slave... The question of what long term satiation looks like is really mind bending, if I don't know what strife is how do I know I'm happy?You could say it’s all about chemicals/hormones but I really don’t think that is satisfactory. Perhaps it’s the arrogance of our species but I’d like to think human consciousness is a little more than this.

What exactly do you consider the difference between those two to be? After all, the ascetics already use outside influences to modify their desires (removal from everyday communities, meditation, chanting, etc all alter mental states).

Speaking of satiation, I highly recommend the short story "The Midas Plague" by Fredrick Pohl, published in 1954. It envisions a society with extremely cheap and abundant energy and where, the poorer you are, the more you are required to consume. Only the very rich can afford to live like ascetics. The story holds up amazingly well after 50+ years.

"I have not kept it secret that I’m a fan of solar power. Leaving storage hangups aside for now, the fact that the scale of available power is comfortably gigantic, that perfectly efficient technology exists, that it’s hard-over on the reality axis (vs. fantasy: it’s producing electricity on my roof right now), and that it works well almost everywhere—what’s not to like?"

It should be noted that some economists at the IMF are thinking about the economic impacts of declining production of a finite resource. Peak Oil, if you want to give it a name.

In practice economists seem to happily ignore and externalize the negative externalities of our present energy systems. Tom has done his bit to get a discussion started about some obvious problems that we, and most of all the economics profession, are not addressing.

Dear Anonymous: Thank you for bringing some objectivity to this discussion. All who have ignored the physics of Murphy because they fault his economics have failed to learn some basic physics of energy. Murphy's site is the best for the basic physical geography of how much, where, and how to get energy in the future. The title of this blog might be changed to Solipsistic Economics.

BTW I generally agree with Murphy's analysis of the energy situation (though I think he too often considers potential energy sources in isolation and thinks too much about "magic bullets" instead of eclectic mixes of energy sources). His math is good.

I just don't like "Exponential Economist Meets Finite Physicist." It's about totally different stuff than the rest of the blog.

I fault him on his matrix of energy sources. "Thorium Breeder" is ambiguous and the choice of fertile/fissile fuels is less important than the fuel form. In a high temperature, molten salt fueled reactor with a brayton cycle turbine efficiency should approach 50-60%. Fuel utilization can theoretically approach unity because reprocessing is done online, compared to 0.3% fuel efficiency using the once-through cycle on a PWR.

Getting pedantic, but I was puzzled as to why Murphy would include D-T fusion and D-D fusion, bot not p-B11 fusion. Proton-Boron fusion is especially interesting because it doesn't produce neutrons, it produces charged particles so there is no need for thermal/electrical conversion processes.

Whatever the flaws of Murphy's post (which you have convinced me not to read), it is nonetheless true that economists are sometime astonishingly arrogant in dismissing the idea that constraints not modeled by economic theory, especially but not only physial constraints, might bind on economic activity (which I suspect to be Murphy's bedrock point).

Consider that response of the economics profession to global warming. It seems to me bimodal; some take it seriously, while others argue that e.g. we should use the market rate of discount while computing cost/benefit ratios, which guarantees that nothing will be done. This seems to me entirely fatuous and morally abhorrent.

Talking about electronic illusion generators when discussing a threat of existential dimensions is hand-waving. If industrial civilization collapses the illusion generators will stop working.

It is sometimes replied that industrial civilization can't/won't collapse because human ingenuity is limitless and will always come up with something to save the day. That's where I came in.

Whatever the flaws of Murphy's post (which you have convinced me not to read), it is nonetheless true that economists are sometime astonishingly arrogant in dismissing the idea that constraints not modeled by economic theory, especially but not only physial constraints, might bind on economic activity (which I suspect to be Murphy's bedrock point).

I agree, but I don't think Murphy is doing any favors for people who think that, when he writes stuff like "Exponential Economist Meets Finite Physicist"...

You Say: "through the application of Desire Modification technology. This is far easier than creating a virtual world to give us ever-increasing amounts of virtual stuff. Instead, we just change ourselves to like the world we have, more and more. When we like the world so much that we don't want anything to change, then we will have no more reason to grow the economy."Good try! Welcome to the Manonite's community.The economist of the dinner might be invented, but your philosophical contortions are really exuberant.

You're assertion that humans will modify our desires until we are so satisfied we don't want anything is like something out of a bad scifi movie from the '60's. If someone were stupid enough to actually do that the result would likely be considered a coma by observers. Without the pain/pleasure-unsatisfied/satisfied gradient you would lose all preferences and motivation; which is to say you could mark no difference between any two possible behaviors or outcomes, and as a result would simply cease doing anything at all. There's no "sweet spot" on the gradient that could be found, either -- a new lower bound placed somewhere between the old one and the upper bound simply creates a new gradient (think drug tolerance).

Moreover, the above illustrates an even more important point, that even though the comatose person would be perfectly blissful and content no one who saw him (complete with feeding tube, catheter and bedpan) would seriously consider getting the same operation done to themselves. Humans value their desires in addition to valuing the satisfaction of them, because without desire there can be no satisfaction.

That last bit is a bit abstract, so here's an example: Timmy is a student in 6th grade who loves science and wants to be a biotechnologist. If you offered to satisfy his desire to be a scientist he would likely think you were offering to make him a scientist, perhaps by sponsoring his higher education. If you told him what you really intended, he would immediately reject your offer because it isn't what he really wants; namely, the state of being a scientist.

There is at least two economic publications where a one thousand year period is considered: Stern and Nordhaus reviews.Stern took an discount rate rate of 0.1%, and it implies that 90% of the benefits of action against climate change will be after year 2200.

Wait, how is virtual reality apples etc going to cost less energy? Regardless of holdouts unless we become super energy efficient with technology some sort of constant VR is likely to be way more energy intensive than actually just growing fucking apples.

Wow a defense of currently existing economic theory from a critique. I didn't expect to read that here.

I agree with most of what you write with one exception. The correct answer to "Are economists ignoring this basic fact? Do economists' models crucially hinge on the idea that economic growth will continue forever and ever and ever?" is some do.

There is a fairly large branch of game theory which focuses on supergames -- infinitely repeated games. It really depends on infinity. An upper bound to our survival of 10^100 years makes all of this math irrelevant. Even if we don't know an upper bound yet, but do know we will learn of one, the math is irrelevant. This is not a small field of theory.

Results of the form something goes to zero as t goes to infinity are often used. This includes much of mathematical statistics. Many, really most, results regarding boundedly rational learning discuss what happens as t goes to infinity. The relevance of all this work given each of our personal t's end all to soon and learning is not automatically passed down to children (kids these days just don't listen) is ... well obviously zero. It is another large field of economic theory.

Finally there was a large literature based on worrying about how to compare infinitely long streams of utility (google Tjalling Koopmans).

Yes economists often recognize that human time will end. But we often assume it won't when that assumption is needed to reach some conclusion we like or to do some fun math.

The point, if any, of this comment, is that economics is a very large target and even astonishingly ignorant critiques are valid in part.

"Do economists' models crucially hinge on the idea that economic growth will continue forever and ever and ever? No. The "long term trend growth" that is used in growth and business cycle models is only meant to represent a trend that lasts longer than the business cycle - so, longer than a decade or two. No economist - I hope - thinks that currently living humans are making economic decisions based on what they think is going to happen in 400 years, or 2500 years, or 500 million years.

The fact that Murphy's interlocutor fails to point this out tells me that either his existence is partially apocryphal, or hiring standards at certain "Prestigious Institutions" have fallen"

You see, hundreds and millions of years - that's quite a bit difference... His 400 years (assumptions requiring 2500 are pure fantasy) are the uppermost and unrealistic boundary. We don't need boiling temperatures to stop us. Actually, we can realistically expect at most 100 times more energy, and that's 200 years of 2.3% growth of energy consumption. And other limits can prevent even that.

So, we have on the one hand Laws of Nature and on the other hand usual handswaving... Some hundreds years (at most! that easily could be decades) are too long to think of... And that's of coarse means Tom is wrong.

Part 2. "Suppose there are 100 holdouts who refuse to upload into a virtual world."

As this part is a pure fantasy - we do not have any virtual reality, and the energy requirements for hypothetical virtual reality for all - forbid it - this part has no meaningful sence at all.

Part 3 "if someone started buying up all the air in the world, the price of air would rise until he had to quit; he could then sell off the air he had bought, but he would be unlikely to make a profit. This is why market corners nearly always fail."

That's a perfect market. Utopia. In the real world the Land part of the production function (smtms missing - why:)) is limited and constrained... For example try to grow the imaginary part of the world economy today - and oil prices would return you to the ground :)

Finally

"My entire argument about finite 'growth' was based on me using my own Tom Murphy definition of 'growth in energy usage', rather than the definition in any undergraduate economic textbook." All concepts "fall under the title" of what Murphy instinctively feels they ought to be called. Nice to clear that up."

Well, your theoretical definition might be right, but... We don't have that kind of happy economy today. And real world economy is working according to Tom's assumptions perfectly. We do have energy consumption growth, we do have growing depletion of any resourses, we do have enviromental degradation - and we do have no time and do have no desire to deal with it. We just wave our hands and worship our deity - Mammon. Yes, our incredible Human Intelligense and the Invisible Hand are going to deal with it. As soon as we have depleeted our natural resourses and/or degraded our biosphere we are saved. Famine, War, Pestilence and Social Unrest will save the day. That's how our Intelligence and Markets work.

I think you either completely missed or deliberately misunderstood some of Murphy's points. First, he did not claim he knows what we will be doing in 2500 years. He said he knows what we will not be doing in 2500 years, i.e. we will not be living on Earth, using more energy than all the stars in the galaxy radiate. We will also not be living on boiling Earth in 400 years. So his point was that it is not all that long when, if we stay on the current course of economy relying on increasing use of energy, we will run into very fundamental physical limits - and practical limits are likely to be reached long before this. He is using reductio ad absurdum to show that economic growth can not continue for hundreds of years by the means we are familiar with - i.e. through increasing energy consumption.

Humans and our societies have changed very little in 2500 years. Our technology has changed quite a lot. So 2500 years is not an irrelevant timescale if someone says that economic growth can continue forever (or 'indefinitely' and not meaning 'vaguely' by it, though the quality argument would seem to imply that 'vaguely' is what is meant by it). Is the 2500-year timescale relevant to us personally, or is it a timescale we should worry about now? No, it is not, but it is a historically relevant timescale, as economical activities of humans have continued for much longer than that. The fact that you point out that no economic model is good for longer than a few decades only suggests we shouldn't take it too seriously when economists speak of timescales relevant to our old age, it does not mean that longer timescales are irrelevant to humans as species.

Second, he did not suggest that someone could actually buy all of energy, he only shows that there is also a fundamental economic limit against that limited energy becoming arbitrarily cheap, since there will be scarcity of it unless society as we know it collapses, because it is needed for anything from breathing and walking to building a computer, or running a virtual world. That air is free has less to do with some utopian principles people share than it has to do with the fact that very few people have use for any more of it than they breathe, and that it is currently available in abundance in easily utilizable and difficultly controllable form. There is a lack of scarcity of air. One would assume that an economics professor would understand supply and demand.

I have to admit that I am quite curious about the economics that dismisses supply and demand and thinks that economists define growth so that economy can grow even if GDP does not increase (or even decreases, since obviously you say it is irrelevant to the economic growth as economists define it).

I think that is quite a stretch of the concept of economic growth to define anything that improves our lives as economic growth. If I liked the movie I saw today more than the movie I saw yesterday, has the economy grown from yesterday because of this if I did not use any more of my resources to see the movie I saw today? If I later begin to think that in fact I liked the first movie more, do we revise our view and decide that instead we had a dip in the local economy though we did not realize it at the time. How do you determine how much economy has grown or decreased if GDP decreases a lot but the amount and quality of knowledge increases a lot and quality of life increases a little? Is this *really* how the majority of economists define economic growth?

The improving quality of products over long timescales is very ill-defined argument. In the present we can let the markets decide the value of currently existing items, but we can not sell items into future or into past. Even if we accept as an article of faith that a 16th century samurai would agree that our items are more valuable relative to the energy spent in making them as are the items of his own era, so that we can say that economy has grown even relative to rate of energy use, we will still be unable to determine how much it has grown.

Murphy is entirely right if you ignore the virtual reality stuff, and your chief objection to him, that "growth only needs to happen until the next economic downturn", is besides the point. Growth and so energy expenditure nevertheless goes up in aggregate, and of course growth and downturns primarily hurt the poor anyway. They do the work, they take the fall.